{"id":75278,"date":"2024-05-14T04:53:05","date_gmt":"2024-05-14T12:53:05","guid":{"rendered":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/2024\/05\/14\/with-limited-access-to-capital-social-equity-marijuana-businesses-in-massachusetts-say-theyve-been-sold-bag-of-dreams\/"},"modified":"2024-05-14T12:45:46","modified_gmt":"2024-05-14T20:45:46","slug":"with-limited-access-to-capital-social-equity-marijuana-businesses-in-massachusetts-say-theyve-been-sold-bag-of-dreams","status":"publish","type":"post","link":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/2024\/05\/14\/with-limited-access-to-capital-social-equity-marijuana-businesses-in-massachusetts-say-theyve-been-sold-bag-of-dreams\/","title":{"rendered":"With Limited Access To Capital, Social Equity Marijuana Businesses In Massachusetts Say They\u2019ve Been Sold \u2018Bag Of Dreams\u2019"},"content":{"rendered":"<\/p>\n

\u201cIt\u2019s not real. It\u2019s not happening. They\u2019re liars. They don\u2019t care.\u201d<\/em><\/p>\n

By Bhaamati Borkhetaria, CommonWealth Beacon<\/strong><\/p>\n

Even before cannabis was legalized in Massachusetts, Kijana Rose knew cannabis could make yoga a better time. Rose, 34, has been teaching ganja yoga for seven years and has been selling cannabis edibles for even longer. Her family is Rastafarian and she grew up with cannabis as a medicinal substance.<\/p>\n

When the state legalized marijuana, Rose was ready to embrace the business model that was being offered to social equity candidates like her. She expected business plans, weed cookies and chill vibes\u2014not the regulatory nightmare she became enmeshed in.<\/p>\n

Her goal was to open up a vegan cannabis bakery in Roslindale. There, she hoped to sell customizable cannabis baked goods and hold community events like book readings. Three years later, her store has never opened under her leadership and she has gone broke in the process.<\/p>\n

\u201cAs an entrepreneur, you know you\u2019re gonna struggle but by the time we got licensed, I was literally sleeping on my CMO\u2019s couch,\u201d said Rose. \u201cI had no home. I couldn\u2019t pay rent. I was on food stamps. I didn\u2019t have anything to my name. I can\u2019t tell you how many times people on my team sent me, the CEO, money to eat because they knew I didn\u2019t have it. That was literally the situation that I was in, and it just wasn\u2019t worth it at all.\u201d<\/p>\n

She decided it was time for her to get out of the business. But that was a challenge as well. Rose had accumulated close to a million dollars in debt. When she tried to sell her license, she was told that it wasn\u2019t worth enough money to clear her of debt.<\/p>\n

\u201cIt was one of these situations where it\u2019s like once you\u2019re in, you\u2019re in, and they don\u2019t want you to get out,\u201d said Rose.<\/p>\n

It took four months\u2014during which she continued to lose money\u2014for her to find a buyer and she is now in the process of transferring ownership. She will only just barely pay off her debt with the money from the transfer.<\/p>\n

Rose said she was the type of person Massachusetts wanted to enter the cannabis business, but her experience left her worse off than she would have been if she hadn\u2019t entered the industry at all.<\/p>\n

\u201cThey sell us a bag of dreams especially in the state. They\u2019re like \u2018Oh! you\u2019re economic empowerment.\u2019 There have to be diversity plans. There have to be positive impact plans,\u201d said Rose. \u201cIt\u2019s not real. It\u2019s not happening. They\u2019re liars. They don\u2019t care.\u201d<\/p>\n

Rose is not alone.<\/p>\n

The entire cannabis industry is struggling as pot prices have plummeted and operators deal with the unique challenges of working with a substance that is illegal under federal law. But those who got into the industry based on state promises of social equity seem to be in particularly dire straits.<\/p>\n

\u201cBy definition, the social equity candidates are the people who were harmed most by the war on drugs,\u201d said Shaleen Title, a former member of the Cannabis Control Commission. \u201cThey don\u2019t have access to the same resources like mentorship, friends, family that others have. That\u2019s the whole reason why we created the social equity program.\u201d<\/p>\n

From the outset, there was a promise made that the state would help those who had been harmed by the war on drugs enter into and profit from the legitimate cannabis industry.<\/p>\n

The Cannabis Control Commission created a training program to create pathways into the cannabis industry for those individuals most impacted by the war on drugs. They also created three different license types targeting social equity.<\/p>\n

Rose qualified for an \u201ceconomic empowerment\u201d license\u2014a type of license that is reserved for applicants who come from and who promise to employ people from communities<\/a> disproportionately impacted by the war on drugs. There is also a special license type given to those who go through the Cannabis Control Commission social equity training program and another for woman-owned, minority-owned and veteran-owned businesses.<\/p>\n

However, one thing a budding business needs more than anything else is capital\u2014to rent a space, to buy products, pay fees and a host of other costs. Yet cannabis operators in general are often not able to get small business loans because most banks won\u2019t do business with them since cannabis is illegal under federal law. The situation is particularly difficult for social equity businesses because they typically aren\u2019t well capitalized to begin with.<\/p>\n

What capital the social equity businesses had was often drained away by a cumbersome, years-long regulatory process instituted by the Cannabis Control Commission that meant years of costs spiraling upward with no revenues coming in.<\/p>\n

Nike John, the owner of The Heritage Club dispensary in Boston and one of the inaugural cohort of the Cannabis Control Commission\u2019s social equity program, said it took about three years for her to make it through the state\u2019s regulatory process and open her store.<\/p>\n

\u201cSmall businesses are already hard,\u201d said John. \u201cRaising money as a woman and minority and being a woman leader is hard. There\u2019s not a single thing about this where I\u2019m like: \u2018Yeah, that was easy.\u2019\u201d<\/p>\n

Lawmakers were aware of the capital challenges so they created a Cannabis Social Equity Trust Fund in 2022, which was meant to funnel a portion of marijuana tax revenues to entrepreneurs with social equity licenses. However, it took almost two years for the fund to start up and the first grants\u2014which some operators viewed as \u201ctoo little, too late\u201d<\/a>\u2014went out in April.<\/p>\n

The market itself dealt a blow to social equity license holders who survived, as marijuana prices plunged. When many operators made the decision to get into the business, marijuana prices were much higher<\/a>. In January 2020, the average price per gram was $14.68. This March, it was only $5.34. In the time it took for many businesses to open, the projected profits had evaporated.<\/p>\n

\u201cHow much you make off a gram of weed is actually not worth it,\u201d said Sean Hope, the owner of the Cambridge dispensary Yamba. \u201cIt\u2019s so hard to open a dispensary. People don\u2019t know that. It\u2019s their life dream and they want to get there. But the pot of gold is not at the end of the rainbow.\u201d<\/p>\n

According to the Cannabis Control Commission, 38 licenses have already been surrendered, not renewed or revoked\u2014more than twice the number reported by the Boston Business Journal in November of last year. Operators across the state are saying that something needs to shift or many more businesses will start to fold in the coming year.<\/p>\n

Dennis Benzan, the owner of the cannabis company Western Front, said the challenges are enormous. \u201cIn this industry, you truly feel like you\u2019re a sharecropper,\u201d he said\u00a0 \u201cYou\u2019re really just paying an enormous amount of taxes, you\u2019re paying vendors and you\u2019re paying landlords. We\u2019re so regulated, we can\u2019t access capital markets. Hence, we\u2019re trapped.\u201d<\/p>\n

When it became clear that his business was not profitable and that it was woefully undercapitalized, Benzan began to explore different options. He hired consultants who looked into exit options and different ways to access capital. Because the profit margins are so slim for standalone operators in the cannabis industry and the particular challenges of operating as an undercapitalized social equity business, the valuations of the company were not as high as they were expected to be.<\/p>\n

With no way to access capital through banks or through the government programs, Benzan turned to larger private companies. But those companies were unwilling to invest cash in the company unless they were given a big chunk of the ownership.<\/p>\n

\u201cIf you\u2019re not running a profitable business, exiting of course would be difficult because your valuation will be low,\u201d said Nike John. \u201cAnd so when you have social equity businesses that haven\u2019t been properly funded, their valuations are low. They might even be lower than the amount of money they raised to get into this. So when they don\u2019t have access to capital, your pool for purchase is smaller.\u201d<\/p>\n

Benzan and other cannabis operators say one potential solution to the missing exit ramp problem would be to change the law to increase the cap on how many licenses a single company can have. Currently, the cap is set at three and Benzan would like to see that number doubled.<\/p>\n

Increasing the license cap is pitched as a way to open the pressure valve and allow struggling operators to sell their businesses to those companies that are looking to expand.<\/p>\n

However, the license cap is one of several policies that the state has implemented to keep large cannabis companies from coming in and cannibalizing the entire market or creating monopolies.<\/p>\n

\u201cWe don\u2019t want to end up in a situation where someone gets a preferential license and then they immediately sell it to a bigger company,\u201d said Title. \u201cThat one person gets their money but now the industry is set up to fail as a monopoly, which long term has a lot of harms to consumers and to society at large.\u201d<\/p>\n

Nike John suggests other policies that will help keep social equity operators in the game and even make them profitable\u2014eliminating licensing fees for equity operators, changing the standards for testing and changing badging requirements for dispensary employees. Of course, the biggest thing she and other social equity operators stressed is increasing access to capital.<\/p>\n

She says that there are disagreements within the industry on what policies people should support, but she is optimistic that there are ways that people in the industry can come together to tackle the problems at hand.<\/p>\n

\u201cI think there\u2019s a lot of consensus in the industry even though there might be different opinions,\u201d said John. \u201cEverybody\u2019s on the same page on the things that we all need help with. We all have to survive in the same jungle and we know how wild it is out here and we just have to work together.\u201d<\/p>\n

Many operators in the social equity space, including Benzan and Rose, think the Cannabis Control Commission isn\u2019t presenting a realistic picture of the market to equity candidates. They said the state is still promoting training programs for social equity applicants who will never get their businesses off the ground.<\/p>\n

\u201cYou can\u2019t encourage people to join a program that is upside down because you\u2019re selling them a pipe dream,\u201d Benzan said,<\/p>\n

The Cannabis Control Commission just accepted applications for the fourth cohort of its social equity program in April.<\/p>\n

\u201cThere are a lot of businesses who I\u2019ve spoken to that are struggling to either keep doors open or to turn a profit,\u201d said Ryan Dominguez, the head of the Massachusetts Cannabis Coalition. \u201cThere were predictions earlier last year about a lot of places closing down, and I\u2019m hearing from people that that is still going to happen because so many businesses aren\u2019t profitable.\u201d<\/p>\n

The Massachusetts Cannabis Coalition launched this year and social equity cannabis operators are organizing as well. Different cannabis groups are all on the same page in response to the growing pressures in cannabis businesses\u2014that both the Cannabis Control Commission and the Legislature need to start paying more attention to the struggling industry.<\/p>\n

This article<\/a> first appeared on CommonWealth Beacon<\/a> and is republished here under a Creative Commons license.<\/em><\/p>\n

\n

Top VA Official Says Psychedelics Have \u201cSurpassed\u201d Marijuana In Bipartisan Acceptance In Congress<\/a><\/p>\n<\/blockquote>\n

\n

Photo courtesy of Chris Wallis \/\/ Side Pocket Images.<\/em><\/p>\n

The post With Limited Access To Capital, Social Equity Marijuana Businesses In Massachusetts Say They\u2019ve Been Sold \u2018Bag Of Dreams\u2019<\/a> appeared first on Marijuana Moment<\/a>.<\/p>\n


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\u201cIt\u2019s not real. It\u2019s not happening. They\u2019re liars. They don\u2019t care.\u201d By Bhaamati Borkhetaria, CommonWealth Beacon Even before cannabis was legalized in Massachusetts, Kijana Rose knew cannabis could make yoga a better time. Rose, 34, has been teaching ganja yoga for seven years and has been selling cannabis edibles forContinue Reading<\/a><\/span><\/p>\n","protected":false},"author":457,"featured_media":0,"comment_status":"false","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[81],"tags":[],"_links":{"self":[{"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/posts\/75278"}],"collection":[{"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/users\/457"}],"replies":[{"embeddable":true,"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/comments?post=75278"}],"version-history":[{"count":1,"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/posts\/75278\/revisions"}],"predecessor-version":[{"id":75279,"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/posts\/75278\/revisions\/75279"}],"wp:attachment":[{"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/media?parent=75278"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/categories?post=75278"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/tags?post=75278"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}